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Take a program that lets a public employee earn both a pension and a salary at the same time. Add an extremely generous disability leave and workers' compensation program that allows public employees to be paid while not working for months or even years on end. What do you get? Massive corruption, obviously.
A new report from the Los Angeles Times attempts to quantify the costs and consequences of a program allowing L.A. police and firefighters to collect both salaries and pension returns in the years running up to retirement. But these same employees often spend massive chunks of their final years on the payroll out on medical leave—so they're costing the city even more money without actually working.
The program is called the Deferred Retirement Option Plan (DROP), and it allows public safety employees who have reached the age of 50 to bring home a salary while also earning pension returns during that time. The pension funds (with a guaranteed five percent return rate) are then given to the officer or firefighter as a single payment upon retirement within five years. When you hear stories about police chiefs or fire captains taking home a massive lump sum of money when they retire, this is typically why.
The Times calculated that employees who participated in DROP took more than twice as much sick leave and disability time off than other employees in 2016: 296 hours compared to 123 hours. Over the course of nine years, the city has paid more than $220 million for police and fire personnel who had taken a combined 2.4 million hours off for leaves and sick time.
None of the injuries claimed by cops and firefighters in this program happened as the result of intense field activity. According to the Times, they tended to be the medical consequences of growing old: bad backs, high blood pressure, cancer, and a lot of carpal tunnel syndrome. Thanks to state law (and the influence of public employee unions on lawmaking), these ailments are all presumed to be job-related. Apparently one of the most terrifying, dangerous beats for Los Angeles Police Department officers is its own offices. One guy's injuries stemmed from him falling off a chair.
The corruption that follows is fairly predictable. The Times includes several stories of public safety employees who spend months or years of their final period on the job out on medical leaves. But they're hardly bedridden or fighting their way through physical therapy. One couple, a captain and a detective in the LAPD, spent around two years each on medical disability, spending some of their time at their condo in Cabo San Lucas starting a family theater production company. A firefighter who injured his knee just weeks after entering the DROP program shares the same name and hometown as a man who ran a half-marathon two months later, but he and his lawyers would not confirm or deny to the Times whether they were the same person.
Unsurprisingly, this easily abusable program was sold by claiming it would accomplish the opposite of what it actually does. City leaders said the program would keep older police and firefighters on the job to serve and mentor new recruits. And they promoted it to voters by saying it would create no additional costs for the city. This is obviously an absurd claim—the city paid out more than $400,000 in extra pension payments in average in 2016 per DROP employee, and the fire department has to pay overtime to fill the shifts of those who take medical leave.
It's not a new thing for cities to not consider—or to deliberately ignore—the long-term unintended costs and consequences of pension-related commitments. It's the very reason why cities (and now even states) face bankruptcy over them. The costs of pension-related commitments are often concealed from residents. The Times notes that Los Angeles city officials haven't even bothered to analyze the amount of medical leave taken by DROP participants.
Public warnings about problems with the DROP program aren't even new. Check out this piece from 2011 that warns that the program wasn't even being audited.
Former L.A. Mayor Richard Riordan, who was in charge when the program was introduced, has acknowledged that DROP was "a mistake" and a "total fraud." But it persists in Los Angeles as other cities and states across the country have dropped it. Even San Francisco dumped the program because it was too costly, and this was after they implemented rules to try to cut back on abuse.
Los Angeles has a big problem with underfunding its pensions to the tune of billions and expecting much higher returns than is reasonable. This DROP program helps make a bad problem even worse.
Bonus link: Steven Greenhut goes over the ways public sector unions in California push for costly benefit packages that leave taxpayers overcommitted.
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